Disasters curb USF&G earnings

April 29, 1994|By David Conn | David Conn,Sun Staff Writer

USF&G Corp. reported yesterday that sharply higher losses from natural disasters and other weather-related claims pushed operating earnings slightly lower in the first quarter.

The Baltimore-based insurer earned $23 million, or 13 cents a share after the payment of preferred stock dividends, in the three months ended March 31. Last year, a one-time gain of $38 million from an accounting change boosted first-quarter earnings $61 million, or 58 cents a share.

Total revenue fell to $766 million, compared with $875 million in the first quarter of 1993.

The earnings drop was partly because of $40 million in losses caused by natural catastrophies during the quarter, compared with $30 million a year ago. The company also said it suffered an unusual amount of weather-related losses in the latest period that were considered less than catastrophic.

"USF&G's underwriting performance continued to improve although our results were clouded by the severe impact of Mother Nature," Norman P. Blake Jr., chairman, president and chief executive officer, said.

Wall Street's estimates for first- quarter earnings varied widely, but the company exceeded most analysts' expectations. The stock ended the day up 37.5 cents to close at $12.875 a share.

"Even though this quarter will most likely produce the highest first- quarter catastrophe losses in the history of the property/casualty industry," Mr. Blake said, the company ended up paying less in claims for every dollar collected in premiums compared with a year ago.

After adjusting for catastrophic losses, the company incurred only 69.1 cents in claims for every dollar of premiums in the first quarter. That loss ratio was down from 72.4 percent last year.

The improved performance was partly because of USF&G's continuing restructuring program, which has slashed expenses and employment, and removed the company from unprofitable states and insurance lines.

Instead, USF&G has focused on its core lines of business, such as various types of property insurance for commercial customers, and reinsurance, or insurance for other insurance companies.

While year-to-year earnings were flat, excluding the one-time accounting change in 1993, USF&G's income before including investment income fell to $18 million in the first quarter from $22 million a year ago.

The life insurance subsidiary saw premiums jump 85 percent above last year's first quarter, while operating earnings reached $3 million, compared with break-even a year ago.

"They seem to be doing a pretty good job at picking up good business," said D. Gordon Luce, an analyst at Brown Brothers Harriman & Co. in New York.

USF&G Corp. .. .. .. .. .. ..Ticker.. .. .. .. ..Yesterday's

.. .. .. .. .. .. .. .. .. ..Symbol.. .. .. .. . Cls. . Chg.

.. .. .. .. .. .. .. .. .. ..FG.. .. .. .. .. .. 12 7/8 . . .+ 3/8

Period ended 3/31/94.. .. ..1st qtr.. .. .. Year ago.. Chg.

Revenue.. .. .. .. .. .. . $766,000.. .. .. $875,000. -12.5%

Net Income.. .. .. .. .. .. $23,000.. .. .. $61,000*. -62.3%

Primary EPS.. .. .. .. .. .. $0.13.. .. .. . $0.58*.. -77.6%

Figures in thousands (except per share data, which is reported after the payment of preferred stock dividends).

* Includes a one-time gain of $38 million from an accounting change. The per share gain was not reported.

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